In a recent study published by the investment research company Morningstar, they estimate that the average dollar invested in funds by individual investors over the 10 years ending December 31st, 2023 earned a 1.1% lower rate of return per year than the actual investments they were invested in.

This resulted in individual investors out on nearly 16% of the investment’s actual returns each year, even without consideration of any investment fees.

Morningstar updates this data annually as part of their “Mind The Gap” study, and in this episode I break down why this is happening and what this means for investors.

More specifically, I discuss:

• What investing insights does this research show us?
• The difference in investor return “gaps” per asset classes invested in.
• Investors miss out on 50% of taxable bond fund returns!
• Why are many individual investors earning lower average rates of return than their investments themselves?
• The difference in investor return “gaps” based on the volatility of a particular asset class.

Resources:

• Access Show Notes and Sign Up for the Retired·ish Newsletter HERE
• Ask Cameron A Question!

 

Key moments are:

00:00 Difference between investment and investor returns.

05:07 Investor behaviors remain consistent over the years despite political and economic uncertainty.

06:37 Return gap varies widely depending on asset class.

12:55 Investors tend to receive about 50% of bond fund returns.

16:33 The more volatile the fund, the more likely investor’s poorly time investment activity.